Court may make a big mistake in Obamacare case

A woman protests against the Obama administrations health care plan during a protest in front of the U.S. Supreme Cour in Washington, DC. The nine Supreme Court justices are expected to rule on the constitutionality of the sweeping health care law championed by President Barack Obama on June 28, 2012. Photo Credit: Getty Images

Opinions about the big Obamacare case the Supreme Court heard this week are highly polarized. But the court could find a way to split the difference between the conservative and liberal readings of the law -- and that might be the worst of all worlds.

The case, known as King v. Burwell, hinges on the wording of the Affordable Care Act. The law authorized federal subsidies to help people buy health insurance on state exchanges. Some states didn't set up exchanges, and let the federal government do so for their residents instead. Conservatives argue that those states are now being illegally subsidized, because the wording of the law is specific to state exchanges. Liberals argue that this amounts to a typo and the subsidies should continue.

The court could end up ruling for both sides. It could find that the conservative reading of the law -- that states must create exchanges if they want the subsidies -- is right. But it could also say that the federal government has no right to set that kind of condition on states -- that doing so would violate the constitutional principle of federalism. By that logic, the subsidies could be allowed to continue.

The justices reached a similar conclusion when they considered a challenge to Obamacare in 2012. The law as originally written tried to get states to expand Medicaid to new beneficiaries by yanking all federal funding if they refused. The court ruled that such a threat was unconstitutional coercion. It rewrote the law so that states that didn't expand Medicaid could keep getting federal money for their existing beneficiaries. They would only miss out on the extra federal funds they would get for signing up new ones.

This time, the White House is making a softer version of this argument before the court. It's saying that the law doesn't require states to set up exchanges if they want federal money, and that if the justices were to rule otherwise they'd be raising constitutional issues.

But opponents of Obamacare have their own federalism argument. Because of the way the Affordable Care Act is written, the mandate that larger employers must offer insurance to their workers applies only in states that are getting subsidies. If states can turn down the subsidies by refusing to set up exchanges, they can also block the mandate. If the court rules that states without exchanges get the subsidies, they'd lose that power. Siding against the administration, on this argument, is the truly pro-state outcome.

Both sides would have reason to lament if the court kept the disputed subsidies going on federalism grounds. Conservatives wouldn't get to confine the employer mandate (or the mandate that individuals buy insurance) to the minority of states that established exchanges, and would be thwarted in their desire to lower Obamacare enrollment figures. Liberals would worry that the court would start scrutinizing other federal-state programs for signs of improper coercion.

And a ruling based on federalism would have another, more fundamental drawback: The Constitution doesn't lay out any clear test for deciding when conditional federal help to states crosses the line into impermissible coercion. The justices would have to make it up as they went along, based on nothing more authoritative than their own sense of what seems excessive. They'd have to draw up remedies, like rewriting the Medicaid provisions of Obamacare, out of thin air. So if they decide this week's big case on federalist grounds, then the Supreme Court could end up gaining a lot more power over public policy.